Is Barnes & Noble in Trouble?
The competition could be too fierce, or book readership could just be on the decline, as Barnes & Noble (NYSE:BKS) sees a weakening in not only its traditional business but also its e-reader and tablet business.
The large bookstore chain has clearly been struggling with its brick-and-mortar stores, as it has made plans to close up to a third of them as part of an overall contraction, with an average of 20 stores closing each year. Of the 689 physical stores Barnes & Noble had late last month, only 450 to 500 are expected to remain in 10 years. Although, there will still be a separate college division which has 674 locations.
As more and more people move to e-readers, tablets, and smartphones for their media consumption, the company’s Nook might not be up to the challenge posed by the competition. Apple (NASDAQ:AAPL) has a strong lead in the tablet market with its iPad, and now its iPad mini variation. Amazon (NASDAQ:AMZN) wasn’t far behind Apple when it launched the Kindle Fire. And the tablet competition has only been getting steeper.
In the fourth quarter of 2011, Barnes & Noble sold 1.4 million tablets worldwide and had a 4.6 percent market share, but that dropped down to 1 million sold in the same period of 2012 and only a 1.9 percent market share. In that time Samsung (SSNLF.PK) tablet sales grew dramatically to overtake Amazon, which still managed to increase its sales year over year, and Asus grew to overtake Barnes & Noble. Apple’s tablet sales grew as well. This left Barnes & Noble as the only company in the top 5 positions for tablet sales to see a decline in sales between the two compared periods…
The weakness of Barnes & Noble’s Nook division is a bad omen in the face of a growing tablet market, especially as the company has to lean more and more on the Nook to drive continued media sales. Unless the company can turn things around quickly, it may be too late for the Nook, as more competitors are coming in quickly, including Microsoft (NASDAQ:MSFT) Windows 8-based devices.
Now, Barnes & Noble is issuing a rather negative forecast after Nook business revenue dropped 12.6 percent, year over year, in the 9 weeks ended December 29. The company’s fiscal 2013 ends in April, and the bookstore expects deeper losses from its Nook business in the year.
As Barnes & Noble struggles to perform, shares are down over 6 percent, with 4 percent of the drop coming in after-hours trading Wednesday night. It will take serious effort from the company to turn things around in the fierce competition of the tablet market.
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